Consumer Credit Subcommittee Appointment Bad News for Rent to Own?

Implications: The nomination of Rep. Carolyn Maloney (D-NY) to lead the Financial Institutions and Consumer Credit subcommittee of the House Financial Services Committee could be bad news for the Rent to Own industry. Rep. Maloney previously co-sponsored a bill that would have characterized the RTO transaction as a credit sale, and thus subject to state usury laws.

Analysis:

The Rent to Own Industry has seen a recent flurry of legislative activity at the state and federal levels, most of which has aimed to put caps on the total cost of an RTO transaction.  Texas and New York legislators have proposed such caps, and Senator Charles Schumer (D-NY) has introduced a federal bill with the same intent.   

The House Subcommittee on Financial Services and Consumer Credit is the key subcommittee for any future Rent to Own legislation.  In 2001, Rep. Maloney was one of only 13 co-sponsors of the Rent to Own Reform Act, which would have redefined rental purchase transactions as credit sales.  That bill was authored by Rep. Maxine Waters (D-CA), who one year later introduced the Consumer Rental Purchase Act, which passed the House and was supported by the RTO industry.

This year, as in years past, Rent-A-Center, Aaron Rents and the RTO industry trade association will lobby for federal legislation that defines a rental purchase transaction as a lease.  The IRS and 46 states agree that it is a lease, and not a credit/installment sale, since the customer may return the product at any time without any further obligation.  Other services offered in the typical RTO transaction that are not offered in a typical credit/installment sale include free delivery and setup, free relocation, free service of the merchandise during the term of the agreement, and credit checks.